Gougers targeted as prices soar

Attorney general focuses on least 16 stations.

Attorney general focuses on least 16 stations.

September 21, 2008|By NICO RUBELLO Capital News Service

LANSING -- As the state handles more than 1,000 allegations of gas price gouging resulting from Hurricane Ike, the Legislature could change the way such charges are probed. While Hurricane Ike devastated other parts of the country this month, Michigan gas prices jumped about 43 cents in a week, taking the average price per gallon to $4.17, according to AAA Michigan. The price per barrel of oil has fallen about $20 since late August. Price gouging, illegal in Michigan, is defined in the state as selling an item "grossly in excess of what is reasonable," said John Selleck, press secretary for Attorney General Mike Cox. Sellers convicted of gouging face up to a $25,000 fine. There were reports that gas reached as high as $5 a gallon. The Attorney General's Office sent letters to 16 stations which increased prices the most dramatically, demanding information about their pricing. Rep. Darwin Booher, R-Evart, said he disagrees with stations that hear about potential storm damage to refineries and immediately increase prices. "If you go out there and set the prices up based on a disaster happening, that's gouging and they need to be prosecuted to the maximum extent of the law," he said. Competition has driven pump prices below the wholesale cost, causing some stations to actually lose money selling gas, said Mark Griffin, president of the Michigan Petroleum Association. Of the state's 5,000 gas stations, probably only a handful gouged, he added. "What consumers may not have known is our costs were going up 60 cents," Griffin said. "Consumers may have assumed they were getting gouged and they didn't realize that we had our cost go up. We probably should have been charging more like $4.35." On a national level, U.S. Rep. Bart Stupak, D-Menominee, advocates legislation that would make price gouging a federal crime. "We have seen oil prices fall to their lowest levels since April, even as Hurricane Ike crippled a quarter of our domestic oil production and refining capacity," Stupak said in a recent statement. "Yet gas prices are up across the country, with Michigan and at least five other states once again seeing prices over $4 a gallon. I fail to see how supply and demand fundamentals explain the simultaneous increase in gas prices and decrease in oil prices." Meanwhile, the Michigan House passed two bills that clarify what the attorney general can use as evidence in looking into alleged price gouging. "Making sure we have gouging identified so we follow along what's gouging is a good thing," Booher said. But Ed Weglarz, executive vice president of the Association of Food and Petroleum Dealers, opposed the bills' vague definition of gouging. "What does that mean, 'grossly exceeds?' If you asked a hundred different people you get a hundred different definitions," Weglarz said. "I think it's a little difficult for a retailer to comply with a vague phrase like that."